Supermarket firm Morrisons attempted to put a brave face on its troubles in a changing grocery market after hiking its interim payout for shareholders in the face of tumbling profits.
The firm said it would lift half-year dividends 5% to 4.03p per share, despite underlying pre-tax profits collapsing by half to £181m in the six months to August 3.
Morrisons said a turnaround plan was well under way to challenge an “unprecedented” shift towards discount names like Lidl and Aldi.
Market statistics released late last month revealed the supermarket had seen sales growth in the four weeks to August 17 after a high-profile price-cutting campaign, the launch of a new convenience store chain and a large-scale voucher promotion.
But sales in the first-half fell 4.9%, with like-for-like figures, which strip out the effect of new stores openings, down 7.4%.
Pre-tax profits fell 31% to £239m.
Morrisons stressed that all components of a £1 billion three-year “self-help” plan were on track, with fewer layers of in-store management and range reductions under way.
Chief executive Dalton Philips said he had been encouraged by the progress which had been made, including the imminent launch of a new loyalty scheme.
He said it was too early to see top line benefits, but change and innovation was being implemented at “real pace”.
“There is an enormous amount of change and modernisation flowing through our core business, much of it enabled by new systems,” Mr Philips said.
“Price investment, in-store improvements, and better products were all key components of the work undertaken in the first half, and the Morrisons card launches soon.
“Our new growth channels online and convenience are progressing well, and our cost-savings and cash-flow plans are both on track to achieve our ambitious three-year targets.”
Shares in the firm closed the day up .2p to 177.8p.
Meanwhile, interim profits fell at top-end supermarket Waitrose, with a slump of 9% to £145.2m put down to challenging trading conditions and the impact of store investment.
But the chain which has been matching Tesco’s prices on branded products as well as Sainsbury’s on own-label items said it outperformed the market over the period.
Meanwhile operating profits in John Lewis department stores rose by 62% to £56.3m, helped by strong growth in the higher-margin home category and a continued surge in online sales.
Partnership chairman Sir Charlie Mayfield said: “The outlook in the grocery sector remains challenging, and we expect that to continue to be the case for some time. In contrast, trading conditions in the non-food sector are more positive than has been the case for several years.”
The group said the first six weeks of the second half had seen Waitrose sales climb 0.9% on a like-for-like basis, with the figure for the department stores up 9.7%.
* Fashion chain Next continues to cruise.
Yesterday it detailed its “strongest sales growth for many years”.
The group said interim profits jumped by a fifth to £324.2m during the six months to July, with sales climbing more than 10% thanks to new stores and improved ranges.
Next, which had previously warned over the strength of the UK’s economic fightback, said it had benefited from an improving economy, low interest rates, the increasing availability of credit and better summer weather.
But it said it was still cautious, and recognised that several of this year’s positive factors could worsen and sour next year’s trading.
The group overtook the more-established Marks & Spencer with a £695m annual profits haul earlier this year, and yesterday reiterated its guidance to lift this to between £775m and £815m next year.
For the first time in several years Next said its retail business contributed more to the growth of the company than its online
UK Directory business.
The company expects sales to grow by 10% in the third quarter and 4% in the final quarter of this year.
It said its fourth-quarter estimate may look “unambitious”, but argued it was up against very strong comparatives from last year.
It has paid three 50p per share special dividends to shareholders this year, and will hand a further 50p to stockholders as a half-year payout.
A further £1 is expected to follow at the year-end, marking a 16.3% dividend rise in the full year.
Shares closed yesterday down 215p at 6,950p following a 40% rise in value in the last 12 months.